Risk Is Not So Easily Defined


Risk seems like a word that is easily definable. Certainly, in the world of finance, explaining what risk is should be fairly straightforward. In reality, defining risk is a bit like defining obscenity—a person knows it when he sees it.

The Merriam-Webster Unabridged Dictionary lists four definitions, and several qualifiers, for risk. They include “the possibility of loss, injury, disadvantage, or destruction,” “someone or something that creates or suggests a hazard or adverse chance” and “the product of the amount that may be lost and the probability of losing it.”

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